China’s most valuable company by market capitalisation, Tencent’s revenues began to slow dramatically about a year ago as Beijing regulators tightened their grip on gaming and other sectors that had advertised heavily on company platforms, such as online tutoring. Weakening Chinese economic momentum has been another headwind.
Analysts surveyed by Refinitiv had expected Tencent’s January-March revenues to grow about 4% from a year earlier. But they were flat instead, at 135.47 billion yuan (US$20.06 billion).
Tencent reports profits under two different accounting standards. Its non-IFRS profits attributable to equity holders dropped for a third consecutive quarter, sliding 23% from a year before to 25.54 billion yuan.
The impact from China’s recent Covid outbreaks and lockdowns was felt most strongly in its financial technology services segment, which includes WeChat Pay.
Segment revenues grew about 10% to 42.8 billion yuan from a year before but declined around 10% from the October-December quarter as Tencent said usage for transport, shopping and dining tumbled.
Domestic gaming revenue decreased 1% to 33 billion yuan from a year before amid Tencent’s failure to get Beijing’s approval to launch any new paid games, as well as tightened rules on youth play.
Last month, China granted new video game licenses to 45 titles, the first approved since July. But neither Tencent nor top rival NetEase had any games included in the new licenses.
International gaming revenues climbed 4% to 10.6 billion yuan. Tencent has accelerated a push into foreign markets but said on Wednesday that “post-Covid normalisation in user spending” overseas held back growth. Its globally popular “PUBG Mobile” game posted a revenue decline.
Revenues from online advertising fell 18% due to lower demand from sectors including education, e-commerce and internet services. The drop-off was especially steep in ad receipts for the group’s media platform, such as its news and video services.
Social networking revenues rose 1% to 29.1 billion yuan thanks to live streaming-related receipts.
Tencent had 68,226 employees as of the end of 2021, compared with 51,350 a year earlier. Its turnover rate edged up to 12.4% in 2021, according to the company’s sustainable social value report released on Monday.